CITIC Resources says metal missing from China's Qingdao port

A dock worker inspects large diggers used to transport iron ore at one of the terminals of the Qingdao Port in Qingdao, China.

Chinese commodities trader CITIC Resources Holding said on Wednesday that more than 100,000 tons of alumina stored at Qingdao port was missing, deepening fears that firms exposed to a metals financing scam at the port could face big losses.

The Chinese port, the world's seventh busiest, has been at the centre of an investigation looking at whether a private metals trading firm issued multiple warehouse receipts so that the same metal cargo could be used multiple times to obtain financing.

The alumina CITIC had been unable to secure has a value of around $43 million based on current market prices.

The probe has rattled global metals markets, reflecting market fears about business practices in China and worries that the probe could extend to other ports and prompt a crackdown on using metal as collateral for finance.

"The company has been notified that in the enforcement of the sequestration orders obtained by the group, the Qingdao court has been unable to sequester about 123,446 MT (metric tons) of alumina which the group has stored at Qingdao port," the firm said in a statement to the Hong Kong stock exchange.

The use of commodities as collateral to raise finance is common practice in China and is not illegal. But duplicating receipts to repeatedly mortgage the full value of an asset is fraud and could leave more than one creditor holding claims to the same collateral.

Panic over the scandal has meant that some copper cargoes held at China's Qingdao Port have been shipped to more regulated London Metal Exchange warehouses, industry sources said.

Global banks including Standard Bank Group and a part-owned unit of Louis Dreyfus, Singapore-listed GKE have warned of potential losses from the scandal.

Standard Chartered has said it is reviewing metals financing to a small number of companies in China and acknowledged there are issues in China around commodity.

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